Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of
a. 30 units of corn and 30 units of wheat.
b. 40 units of corn and 30 units of wheat.
c. 40 units of corn and 20 units of wheat.
d. 10 units of corn and 40 units of wheat.
Answer: a. 30 units of corn and 30 units of wheat.
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The median voter model
A) works well in the area of trade policy. B) is not intuitively reasonable. C) tends to result in biased tariff rates. D) does not work well in the area of trade policy. E) is not widely practiced in the United States.
Kate and Alice are small-town ready-mix concrete duopolists. The market demand function is Qd = 20,000 - 200P, where P is the price of a cubic yard of concrete and Qd is the number of cubic yards demanded per year. Marginal cost is $80 per cubic yard. The Cournot model describes the competition in this market. Which of the following gives Alice's best response function?
A. QA = 200 - 0.01QA B. QA = 100 - 0.005QK C. QA = 2,000 - 0.5QK D. QA = 2,000 - 0.5QA
When a major car company lowers its prices, other car makers will probably
a. maintain existing prices. b. raise their prices. c. go out of business. d. lower their prices.
If fluctuations in economic activity come from the supply side, higher inflation is associated with
A. lower interest rates. B. structural deficits. C. higher rates of unemployment. D. lower rates of unemployment.